Friday, 2 June 2017

What’s next? – USDJPY 02.06.17

USDJPY

The dollar extended its recovery against the Japanese yen on Friday early trading, as traders headed to a fresh release of labor market data, including nonfarm payrolls and the unemployment rate for May, with all looks currently pointing at the Fed’s June meeting.

However, data showed a smaller-than-expected jobs build in May. According to the Labor Department, 138,000 jobs were added last month, falling short from expectations of a 185,000 jobs increase. May’s figures came in even below the prior reading of 174,000 jobs.

The unemployment rate ticked down to 4.3 percent from a prior 4.4 percent. In a separate report, trade deficit expanded to 47.6 billion from a prior 45.3 billion.

Downbeat data created downward momentum over the American currency. The US dollar index, which gauges the greenback against six major currencies, plunged back to 96.75 following the labor market data, losing more than 40 percent in a few minutes.

The USDJPY was trading around 110.50 by the time of this writing, falling by more than 0.80 percent and quickly leaving behind its May 26 peak of 111.680.

Today’s NFP report can be considered like the most important event ahead of the June 13-14 monetary policy meeting of the Federal Open Market Committee. The political crisis in Washington and downbeat economic data are setting a not-so-optimistic tone for the regulator.

Traders fear that the Federal Reserve will decide to correct its normalization monetary path and adjust from up to three to two interest rate hikes this year. While that could be good news for Wall Street, there is still lot of analysis to be made. Only a few days ago, San Francisco Fed President Williams said he is still looking at three hikes in 2017.